Alejandro Guerrero — Act One Ventures

Posted on Wednesday, September 1, 2021
Alejandro is a partner at Act One Ventures.  We discuss:
 
  * Entering venture capital without a “traditional” background
  * Why VCs need to start measuring success differently
  * The Diversity Rider
 

View Transcript

Alejandro Guerrero is a partner at Act One Ventures, a community focused early stage firm leading pre-seed and seed rounds in e-commerce infrastructure, vertical SAAS and FinTech. Alejandro is also the author of the “Diversity Rider”, a term-sheet rider that VCs are using to get more diverse investors onto the cap table.

Alejandro. Good to see you.

What’s up Minnie? It’s great to be here and thanks for that lovely intro.

Great. I hope I got it right. Why don’t we start with Act One though, and try to get some of the basics of up front.

Yeah, totally. So, Act One Ventures, founded here in LA gosh, about six years ago now. My business partner, Michael Stilton, and I started it up. Originally, he and I met at the UCLA venture capital fund. So he was running that full-time after he had walked away from his public company that he founded and ran for 10 years. And I was starting my second software company and was in desperate need of finding mentors in a network. I spent three years volunteering for him as an associate, just to be a part of the network and help younger founders, um, while I ran my company. 

And then yeah, 2015 I resigned as CEO of my company to work on my next thing. And then like luck and timing. You know, Michael was ready instead of starting a forest software company. He was like, yo, let’s, let’s do this venture capital fund neither one of us were looking to become venture capitalists.

But I think for him, you know, just seeing the impact that he had made over 10 years running that fund, you know, 32% realize IRR. He gave me the opportunity of a lifetime to join him from the beginning and I kind of ran with it head first. I didn’t know if I was going to like it. I didn’t know if I was gonna survive it. 

So I assume you like it.

Yeah, I do. You know, I would say that my first year was really hard because I felt out of place. You know, there’s just not a lot of folks that look like me or come from my kind of background. But after my first year, I kind of did a little bit of soul searching and just pretty much what I realized is just like there is an incredibly large group of folks who do come from these communities where I come from, who do look like me and who were desperately looking to meet investors who also came from those communities and who could share stories of what it was like to be a founder of the successes and the failures. 

And once I sort of flipped my mindset to that way, everything really changed from that point forward. And it’s been the absolute privilege of a lifetime for me.

Yeah. So working with entrepreneurs, I mean, that thrill is palpable. And I think we share that. What about being in the VC community? Do you still feel like, or how did that sort of evolve? And feeling like, okay, there’s a lot of, white men who went to Harvard or something like that.

Yeah. I mean, that’s really what it was. It’s like I found myself in situations where I was just consistently uncomfortable because I had, I was like, what was it I’m not going to, I’m not building a second story to my house. You know, I don’t know. Rental, you know, all these other things and that’s just what it is, right.

It is what it is. It’s just, it’s just different stories in different paths. So, you know, a little bit more uncomfortable. You know, I had been around, you know, folks raising capital for years. So I kind of knew how to be able to fit into a role, but  being on this side of the table was a little different, right?

Because It’s so different than raising money for a startup. You know, how you find your sources of capital, how you build those relationships, how you source companies, all of that it’s just  so relationship driven. And you’re constantly having to meet folks and meet who are the funds that you can work with, the people that you get along with.

It’s just never-ending games. So people think that venture capital is easy and it’s as you know anything, but it’s super hard.

Yeah. one more on this theme. Cause it’s interesting to me is, you know, I made the transition pretty recently I feel like people treat me differently. because now all of a sudden I can write checks. And it’s a weird, you know, you become popular overnight with founders who, know, otherwise my, yeah. Anyways,  Anyways, I was wondering if you find it’s weird how you sort of enter into communities and those conversations are just different.

Yeah. I mean, there’s certainly a power dynamic, right? That, that, that is there. There’s no denying that. Um, you know, I think I’m very much cognizant about it, like you. And so, you know, I’m mindful of knowing that, you know, look, every founder wants to raise money and they might tell you whatever they think that you want to hear to get it done.

Right. So it’s our job to be able to kind of cut through all of that and, and, you know, make sure we’re really honing in on the right things. Just generally, you know, I just live by some good rules of just be good to people, you know, be helpful where you can and when you’re ready to pass, just pass and be respectful about it.

 I’m saying no to pretty much everything I see. Right. So it’s really ended about five, six investments a year. So majority of the time, we’re going to say no, but, you can always write somebody back and let them know instead of ghosting them.  Right. So just, just little subtleties like that, that, you know, hopefully go a long way for founders who, you know, the struggle is real and we, we know. 

Yeah, no, the, the, the power dynamic hearing where people who want to say, I’ve been talking to investors who say, yeah, I thought we shared this vision, but then I realized. That I was sort of projecting my vision and the founder was

Okay.

agreeing with me and, know, two years later into the investment, I realized we actually didn’t, weren’t really eye to eye.

And that happens, right? Like sometimes, you see a lot of investors that try to impose, um, and there’s just different ways that people go about investing and how they are, you know, quote unquote value out. I think our approach has always been about bringing like a light touch. You know, I like to view these folks as like they’re all fully.

You know, like they spent five to 10 years in an industry. They went off and got educated or through the school of hard knocks or whatever. Right. Like they went off and they learned and they experienced life and you know, maybe it took a punch to the face and, just kind of know what that’s like.

So, we’re not here to tell them what to do. Most of them are really, they have all the capabilities, maybe what they don’t have. The network, right. And folks too, they can kind of turn to and say, Hey, I’m thinking about this or that. What do you think? That’s what we kind of come in right on this, like, of light touch approach.

You know, our, our whole emo is like a monthly cadence, but there for them as needed at any time or day of the week. But knowing that most of the time, you just need to see out of their way and watch them do that.

How have you found bringing in network valuable? What has worked there?

I was looking at your website. You’ve got a lot of advisors up What has worked there? there and it’s something we think about at 10, 1 10 is how to bring our network to our companies.

it’s been huge part of our success you know, our. We’re we’re a two person, you know, investing team, Michael and I, so, obviously you’re our, we don’t have all the time in the world to do everything. And so part of our sell in our whole approach has always been this community-based aspect of look.

Even if we know we’ll share a story with you, if we don’t know there may, there’s likely somebody in our network of LPs or advisors who has been there, who are happy to share that with you and. It’s been extremely helpful because you know, a lot of our LPs are former entrepreneurs, executives, finance steers, who become very successful.

And now that they’re invested in our fund, they have a financial interest in the outcome of these companies. And so they are always happy to take a cup of coffee when, you know, when that was still happening, I guess, kind of still happening now. Um, you know, but have a cup of coffee,  have a conversation and, and not just like freak out about it, but like be willing to follow up and make themselves available for those founders.

that was a very. Big difference from what we saw at the UCLA VC fund where it wasn’t for profit people, either donated money or options. And so, you know, Michael could get somebody to, yeah, sure. Like I’ll spend 15 minutes with this founder, you know, cause they’re a Bruin and I’m a Bruin, whatever, but then yeah.

After that ended, they totally forgot that they even had the conversation right there. They didn’t have a financial interest in the outcome. So I just think being able to bring that kind of approach to this, and particularly again, a set of founders who, majority of them are diverse. And so, no, they’re not all like in your networks, but you know, they could always use more.

And

so this is what it’s about, right? For us, it’s just bringing a ton of value in terms of how can we help you meet more customers? How can we help you understand product market fit? And how can we introduce you to the folks in our network to help you with any other things in between.

So it’s not like you haven’t, programmatized it, it’s more like a bespoke match someone with the resource that they need at that moment.

Yeah.

Yeah. It’s I mean, it’s an aside, but it’s like, we’re talking about at 10, 1 10. You know, should we, eh, you know, how can we take it to the next level of just sort of get getting that mentorship? Um,  tell me more about your, sort of the basics of your investing approach. Like, are you trying to really get in as early as possible? I mean, you and I share Cartwheel, which we invested in at, you know, single digit post money valuation in a lot of the deals I’ve seen you in. How do you think about.

You know, we’re S we’re definitely the seed phase approach, right? Um, seed pre-seed. I mean, the nomenclature is weird these days, just given the round sizes and everything. it, it, it’s always dependent on the founder market fit, I would say, and where they are in the life of the business. You know, we’re not, we’re not shy about coming in earlier than normal.

But obviously the evaluation would have to be appropriate for that. You know? So it, it’s, it’s a little bit more challenging these days, given that, you know, prices are through the roof and there’s money flowing everywhere. And there’s just a lot of noise, but, you know, we stay pretty disciplined with, with our approach, right, where we’re making sure that we, you know, we have these dramatic, these themes that we’re investing in.

We’re looking for folks that are coming out of those industries within those themes and that we believe. Have all the potential to make it. They just need, capital as an accelerant and access to folks and networks to continue going forward. But, um, you know, ideally, you know, ideally, trying to come in and like that 10 million post money, you know, that’s the ideal, looking for 10% ownership with about a 5% floor, it’s more challenging these days, uh, certainly with everything going on, but you know, at the end of that, If you don’t say discipline, you can’t really do this over multiple, you know, funds as a franchise.

So for us, it, you know, we we’ve seen some great founders when we, maybe we met them a little too late in the process or somebody else just came in with a much larger check and sort of elbowed us out and that’s okay. Right. It sort of happens. It comes in and goes, but I, definitely do not let FOMO drive me at all.

I, I care nothing about FOMO once it’s gone, it’s gone. It on to the next.

how do you avoid the FOMO?

you’re just, you’re just not going to get in every great deal. It’s just not going to happen. You’re not going to see everything. It’s not going to happen. You know, you, you try your best to make sure that, you know, you have a pulse to that, you know, having the network, the local network, You know, that is incredibly important, but at the end of the day, it’s just how it goes, you know?

And I think in this environment, yeah. You know, I’m, concerned as to how things are going to shake out over the next two or three, whenever there’s a reset. Right. I have no idea when that’s going to happen. Certainly not this year feels like, um, but like, you know, when the tide goes out, who’s, who’s got the pants on, right.

Who sort of was able to do things from a disciplined approach. And, um, you know, I, I feel confident. Doesn’t mean that our portfolio may not take a hit here and there, like everybody, if it really goes bad, but I feel good that, you know, we’ve, we’ve stayed true to our core and our discipline and, you know, investing in folks that are, you know, thinking about building profitable businesses, thinking about like, you know, how do you make, how do you make this eventually, like, you know, uh, each and every transaction, you know, profitable, you know, you can unit unit economics and little things like that.

So, uh, again, you know, just, just making sure that we spend the right amount of time getting to know these folks and, uh, and making sure that it’s a fit both.

Yeah.

Okay.

Yeah. When the tide goes out, who’s got their pants on.

Yeah.

yep. Um, and, uh, Is it, um, what was I going to ask there? Are you only LA,  are you only Southern California or are you what’s geographic for you?

No, we’ll invest across the United States. We’ve also done two deals in Mexico. So I actively look at deals coming out of Mexico. It’ll probably expand into greater lots on once we have the full, sort of third phone going and whatnot, but, um, yeah, look, it’s it. I’m here to best invest in the best and brightest, you know, business software, founders, and respect of where they’re at geographically.

I think it’s, it’s abundantly clear now that, uh, where living in this new world, right. Whatever it is, it’s, it’s different from the old, and we’re doing deals over zoom. And, you know, at some point meeting the teams, but certainly it’s not a barrier to getting a deal done anymore. talent is distributed.

We’re distributed. there’s a lot of opportunity here and I think it’s, it’s beneficial to a lot of, diverse founders who, may not have been concentrated in these like premier tech hubs. And if they were, maybe didn’t even have access to the right folks,

I actually feel like there’s kind of puts and takes on zoom, which is yes, you can meet it. Yeah. But you have less serendipity and just going to the community events. And so actually a lot of my introductions are from people in my network, which means I’m not seeing as many people who are outside of the network.

Yeah. And that’s sort of, A broader tail of venture capital. Right. You know, just sort of how the networks really drive what we see. And I do think it’s on us, particularly, in the world that we’re living in, that we’re thoughtful about how we continue to expand outside of the folks that we know.

Cause it’s, you know, as, things moves really quickly that inertia of like moving a deal really fast, it’s like, oh, I’m thinking of like the one or two people that I always do deal with. You know, I, I take a step back particularly after the events of last summer. And it’s like, you know, we, we need to be more mindful of, of all of this because you know, we’re here at the Vanguard of, you know, creating generational wealth for some incredible people.

you don’t know where it’s going to work out. Right. We’re at the seed stage, but we know that with the right work and the right approach, something magical can really happen. And so just making sure that we’re cognizant about who gets the opportunities to invest, not because it’s charity, but because.

They’re great individuals who are diverse and who bring a lot of value to these companies by being on the cap table, they just got to get invited to the party.

Right. And that is, um, what I, as I understand, as I understand it, that’s what the diversity rider is to do.  diversity rider your idea.

 It was my idea. 

me about how you, uh, you know what I imagine the murder of George Floyd had a, uh, a catalyzing effect on everyone. Um, but yeah. Tell me how you decided to do this and how it came together.

Yeah. So I, um, it, it, it all came to a head with George boy’s murder. I was sitting in my apartment in the dark on the Friday when we were on lockdown, when everything was about to get looted over on, on Melrose and. just like seeing these images on the TV of the helicopter and, you know, I’m, I’m, you know, started crying a little bit, you know, because I was thinking about my life growing up as a first gen kid, low income and all the different challenges that come with that.

And I just really like, how the hell did I end up here? Like I’m managing a venture capital fund. Like I didn’t even create real wealth for myself to get here when my partner was like, yo. We’re going to do this, you know, like I’m going to put this on my back, you’re going to ride shotgun and we’re going to go into this world.

And he gave me this incredible opportunity to view something that most people don’t get a chance to see. And we were able to persevere through the many, many challenges that as you know, right. Come with raising a venture fund immune. It’s just not a game where, you know, if you don’t show up the table with no money that you can sustain yourself and survive.

So just like seeing. How hard it is, how we’ll pick the world is how people really don’t know how it truly operates from the inside while also having the, either the experiences as a founder and like the pattern matching and all of those things that were totally felt before these were topics of conversation.

It just all boiled up in me with rage. And I don’t know, the idea just popped in my head, you know, so I was sitting there and I just realized. This is a moment in time where we can actually create change where I believe it’s needed, which is at the cap table. It’s access, right? It’s about creating wealth.

Like if we’re sitting here hoping that someone is going to come and save us or save our community. For us, tripping, you know, that’s just, if that was going to happen, it would have happened by now and it’s not happening. I just didn’t want this moment to be like a gun shooting in America where it’s like thoughts and prayers.

Let’s move on to the next one. And we get the sensitized. I was like, no way am I going to let this moment come and go while everyone’s going to go work on free programs and whatnot. And there’s certainly a group of people who benefit from that. I’m going to go focus on something that creates better access for equity.

Sorry.

no,

Okay.

so powerful. Um, I feel like I, I often see it. It’s such a fine line between

Okay.

able to do with my life and the seat I’m sitting in. I could have been in a far different path and, and how lucky I am and how small, Butterfly effects, but like how small little things completely can change the path.

Yeah.

I mean a hundred percent. I mean, like I got here because, at some point in my life, in multiple points in my life, somebody who didn’t owe me anything Saw something in me that I didn’t see in myself and opened the door for me. And not only did they open the door they walked me through the door they told me how to think when I got through the other side.

And I think most importantly, when I failed, they helped me realize that it’s okay. That light life goes on that. And it’s a hard thing to feel those feelings, as you’re trying to go out as you’re cutting against the grain and trying. sort of break a generational curse, if you will, from, you know, the way things have been in, in, in, in family life, it’s just hard.

And so. I feel really, I feel so lucky that I’m here. I mean, I’ve worked really hard. Don’t get me wrong. I didn’t get any handouts, but I know that there’s been help along the way. Like you just don’t get here by yourself. There’s, there’s, there’s a group of people that do that. And I think it, I think it, falls on us as a generation of folks who are at the Vanguard of the new crop of entrepreneurs and the new managers and how we deploy capital to be cognizant about that.

To do the work, to me doing the work means, doing things like this, where, creating access for folks to help them build track records, to help them build wealth. the benefits of these things don’t necessarily accrue to us, the folks at the Vanguard, but I think that’s okay.

Like Like there’s nothing wrong with that. You know, at some point it’s like, if,  if we’re not going to do the work. Again, I go back to the whole notion of like, if, if somebody else was going to save us, they would’ve saved us by now. And then they’re not, there’s no savior coming. So we either going to take it upon ourselves to do it or not.

And

I said, I’m going to do it.

Oh, that’s great. That’s great. Yeah. I recorded an episode with Carrie ransom from operate and he was just really eloquent on how we need to just start measuring ourselves differently.

Almost like competing on different metrics. 

Yeah. Uh, you know, I recorded an episode with Carrie ransom from the operate and he was saying like, we need to measure ourselves and think about our success. As, as more than just sort of in addition to the bottom line, it’s it also has to be the opportunity we’re creating and what, you know, take a bigger view of, of responsibility that these jobs have with them.

Yeah. And I completely agree with that. You know, it’s, it’s just, it’s too easy. To become successful and then turn your back and be like, you’re on your own, like it’s dog eat dog. I had to figure it out. You gotta figure. I hate that. You know, I hate that we live in a society where a good group of people feel that way, you know?

And it’s like, I totally understand it’s capitalism. It is, you know what it is, but I just think the way that capitalism has been practiced to this date is not sustainable. And we need to reimagine ways of how we need to change what this whole thing is, because the reality is, is there’s a large group of people that have been locked out of the system for a very long time.

So the game is uneven. Even if you want to say, okay, we’re all going to get for opportunities now. It’s, it’s still skewed, tremendous weighted one way versus the other. Right? So unless we’re here to support one another, be more open with our networks and provide access, it’s going to be really difficult to, but I’m an optimist at heart.

And I do feel like, what I’ve been seeing over the last year, particularly. The message hasn’t dissipated into the wind. There’s certainly a group of folks who probably don’t care anymore, but that’s not everybody. fundamentally the founders are taking it to heart. There’s VCs, yourselves, and ours, who, who are just operating in a different way.

And I think we’re going to be.

And, would you agree that the tech community. Has a reasonable amount of the give first mentality?

I mean, maybe, you know?

No, no. You’re allowed to say no. And that’s my question is like, do you feel it or not? 

I dunno. I just, like, I just feel the tech community is like insular, right?

it’s very insular and sort of living in its own world. And sometimes I see like products that are being built and I’m like, these are not products for anybody outside of like tech hubs. You know what I mean? So, yeah. You know, there, there’s certainly a large group of people who’ve done become successful and do great work.

Um, I think things can always get better, right. In every way we just have to look at ourselves and say, what are we doing? What, what more can we do? But I say that with the caveat of, make sure that you have a strong foundation under you. So that, that if you’re doing that. It’s not going to crumble over you because to me that is the most important thing.

It’s like, you want to change the world and you want to do all these things, but you can’t do it all at the same time. It’s like, it’s like really hard to take off airplane from two different runways at the same time. Right?

So you want to be focused. You want to focus on one thing, do it really well.

Build yourself up to a place where you have that foundation. As you go and try to do more if, uh, you know, if something strong comes your way, there may be a crack in the foundation, but it’s not gonna crumble under you. And I think that’s a really big thing, especially for founders as you’re raising and growing, you know, from your seat to your series, a I always tell my founders, congratulations.

Like you, you pass the hunger games, welcome to the game of Thrones. Now it just, it just doesn’t get any easier from here. It’s still a competitive nature. So don’t think you can sit around and tell everybody how wonderful you are raising money. That’s not the outcome here. The outcome, the goal isn’t to just raise money.

The goal is to build a large credible company that ultimately means a lot of liquidity and success to everybody.

Yeah. I also struggled a little bit, which is founders who have the opportunity to, uh, make really life-changing wealth or founders who have the opportunity to get life-changing wealth. And maybe they’re not building a multi-billion dollar company. Um, do you have to navigate that with your founders?

 What do you counsel your founders about selling early or taking money off the table? 

They’re all shooting for these big outcomes. Right. but look, I, I think at the end of the day, we’re here to be supportive of them, of the journey. You know, we go into this knowing both sides, what kind of outcomes we’re looking for? Right. We’re looking for venture size returns. And so we’re investing as such, But, you know, we’re not here to tell them what to do.

it’s all about opportunity and timing and you know, if the right offer comes along, what we advise our founders is just like, understand where you’re at in life and why you may want to consider selling or not at a certain moment in time. And, you know, are you leaving a lot on the table?

Do you feel like you’re going to regret it? Is there a way for you to sort of get some of what you want, take a little chips off the table without necessarily selling everything. So it all just depends you don’t really know unless you have those conversations and it’s, I just think that it’s good to be a coach for them, but not tell them what to do, because these are their companies, not ours.

Would you say, maybe this is too hard a question, but like, would you say that VCs to air too much on the side? Trying to add too much value or trying to tell founders what to do as opposed to not doing enough.

I would agree with that. There’s a lot of really smart folks out here or investors, and they to tell people what to do and they want to share all this stuff, you know? And it’s like, oh, that’s cool. You know what I mean? That’s an approach, right? And there’s a certain, a founder who made like that, I’m not here to bash on them doing that.

I just think that every founder needs that. And I think at a certain point it just becomes a distraction. When at these stages they need to be focused on. Working with their teams, figuring out product market, fit, hiring folks, you know, and it’s like, if along the way you have challenges, let me know what those challenges are.

So we can talk about them. Let me not create additional challenges or additional headaches for you by constantly showing up and asking you what what’s this? What’s this what’s this right.

it’s sort of like a relief for me. I actually tend to mostly have guilt I’m not doing enough, but maybe you’re making me feel better about it.

we, we make it clear. Yeah. Anytime you got something come to us, but we don’t just want it to be like a conversation. Just, Hey, how are you every week? No, it’s like, you’re busy. You’re building. And so like, we don’t want to get in there when you, when you get into that good rhythm, you got a great flow going.

It’s like when you’re hot, you know, when you’re playing ball and you’re like, got that hot hand, you don’t want to disrupt them. You just want to get out of their way and watch them do their magic. And I feel like that’s kind of how I viewed these founders. You know, it’s like, Capital is that accelerant that they need to be able to start making those hires to start bringing in the appropriate teammates.

And it’s wonderful to see that happen. So, you know, we’re there to help them through that as they’re doing it, but not here to tell them what to do or force them to go one way or the other, it’s part of the learnings that every founder has to go through as you, as you know, well,

Yeah. Um, let’s go back to the diversity writer for a second. We’re really articulate on like  to do it. also just give me the nuts and bolts a little bit, which is just explaining to founders like the term sheet, you know, how that works. rounds kind of all comes together.

You know, in a term sheet, right where we’re coming together, you know, a set of ambassadors and a set of founders, because we spent some time getting to know each other. We believe that, you know, there’s a value, both ways of us getting involved as investors in your company and, and, you know, the founders having us on their cap table.

So coming together, we’re like, all right, cool. We want to do this, you know, And so every venture fund has like their standard term sheet. And it’s just like the basic framework of like, these are things that we have to talk about in order for us to figure out if we can come to an agreement to do a deal.

you can’t issue a term sheet without talking about, well, how much money do you want to raise at what price? So in that same mindset, The idea here was to include a diversity writer within all of that. So that conversation just like you want those other ones the key moment in time, which is when you’re negotiating the term sheet, because that’s a moment where both parties have influence, To determine we’re going to think about the Cathy, but we don’t have to get it figured out at that moment. The language is very specifically designed to, you know, you can even leave the 30 or 60 day window open so that you could figure out who those right co-investors are from an underrepresented community for this particular deal. But being mindful that, a lot of times founders all want this, but it’s a really sensitive subject.

And so there’s times when they are too scared to bring it up because they don’t want to ruffle the feathers or disrupt any of the inertia. They just want to get the deal done and just get the money in the bank.

So. having a venture firm, having it in their writer, just from the jump levels, the playing field that like, Hey, not through our words, but through our actions, we care about this stuff.  where it matters. Right? Like expanding access and equity. let’s spend the time to have this conversation about who in my network or in your networks.

We can, Allocate into this round. And whether that’s like percentage basis or dollars basis, we let those variables open because I know how it is, you can’t tell so, but he what to do and you can’t force a firm or a founder to do X percent or X dollars. It just sometimes doesn’t make sense, but there’s always a way, way to make a deal diverse if you want it to be Even if you’re investing in white men, you could still bring women and people love. From underrepresented backgrounds onto the cap table and still achieve a level of diversity where people are getting access into equity rounds, To me, that’s really the goal of this was to just, get this conversation happening everywhere all the time.

So that hopefully one day this writer isn’t even needed because we’re talking about this so often that it’s just like, oh yeah, of course nature. But we definitely are not there today.

Yeah. no, I do it every time I’m asked to be on a panel. I always say, is it an all white panel?

at some point maybe I won’t have it. But right now answer is often. Yes. Um, I think the thing that I think underestimate at the point where there’s a term sheet going back and forth, I think founders generally have more power than they think at

that moment. 

 And I think that’s been one of the biggest windows that VCs have been able to push on founders, making them think that like,

And the reality is they do,

they have all the power, it’s their companies. They get to decide who comes in, who doesn’t come in. investor may want all the allocation doesn’t mean they get to have all the allocation, but I think it’s just been big world of the haves and the have-nots and the haves and really, sort of even more.

So these days become even more aggressive, Where there’s more people coming earlier. There’s crossover funds. I mean, it’s just, it’s a wild west out here. But the end of the day, the founders still have the control. They have the power. And so, having folks that are cognizant of that and whether the CEO diversity right in the term sheet or not being like, we’re gonna withhold 10 or 15% of the rounds.

To create room for these folks, whether that’s in a couple of individuals, a fund, uh, you know, a much larger SPV with multiple individuals. I mean, it’s up to them to figure that out, but ideally, you know, you have partners, investors that are like understanding of that and want to support that.

I think it’s very telling that’s, that’s where I feel like this is kind of driving us kind of drawing a metaphorical line in the sand where where it’s like, you’re either about it. And you’re actually doing the work through your actions, not just the programs. On the things that matter to the core of your business, which is deals, Figuring out how you’re creating more access on deals, or you’re not right. It’s like either one or the other, but there’s no middle ground and you can’t market statement your way out of it. And eventually, founders will know who are the ones that are actually doing the work and who are the ones that are just talking about it all day.

Yeah.   

Yeah. I just think the way it plays out, the way I see it play out is the fun says, here’s your term sheet. I want you to sign it today I’m always trying to tell them. Look, still going to be interested on Thursday. Like today’s Monday. Like they want to do the deal.

They’re going to want to do the deal days from now, really, and this gets tricky, but like want 21% of the round. They’ll still gonna want 19% of the round. But I think that gets scary for founders because they don’t want to that.

this whole rush of everything mean it’s basically been founder-driven right. they’re in control just because somebody is ready to give you. A $5 million commitment to your round. The day after you start raising, it doesn’t mean you need to close it the next week.

founders should take some time to get to know who these people are because it’s a marriage that you can’t get out of. are they aligned in similar values? Are they going to be there to support you or to bother you? What kind of help do you actually need?

Like, these are the things that hopefully you’ve been thinking about before you go into raising the round. But yeah. Yeah, you gotta be thinking them more thoroughly in real time as you’re going through, because you’re meeting the people, you’re getting a sense of who they are, but can you really know who somebody is when you only know them for like five days?

No, you can’t. You know, this is where you rely on, you know, reputations and you know, and everything else that’s been around. And yeah, that that’s there too, but still, you know, I just think. It does a disservice to the founders. If they don’t put a little bit more thoughtfulness into, how they’re running these approaches. yeah. It’s, uh, it’s just different time on here.

Yeah. Um, Uh, anything else? been some notion that people are sort of raising in between rounds and stuff, but most part, I think rounds are just going incredibly quickly and not really staying open and maybe not staying open to the detriment of diversity is that same thing you’re seeing.

So they’re, they’re, they’re just going really fast. There’s just, no, there’s no question about that right now. Um, there’s, there’s good and bad on that, right. just, depending on the situations and, and you know, what comes with the check and whatnot. I do believe that, If these rounds are moving out at a, at a blazing speed and it’s just one fund or, you know, one check and it’s like, yeah, you know, like they’re just what I call missed opportunities, right there.

It’s an opportunity where you can help make a change. It’s a small change, but if we’re all doing it on here, then we’re collectively doing work to all move. A better future that we want to have. And, and no one fund or no one founder is going to be the driving force for that. It’s going to take a massive collective effort across the country of people being mindful about this.

You know, whether they see whether they use it right, or whether they don’t use a writer, you know, whether they’re a founder, that’s holding an allocation open or not, it’s just that mindset has to change. And it has to become ubiquitous all of us in order for this to really start to accelerate. What I feel disheartened about some times is like, you know, you see these reports. was like, oh, record quarter record this. And it’s just like, it’s not going to the people that I’ve been lacking. It’s just going to the same group. So thanks for showing me how you’re continuing to let me know that the work that I’m doing is incredibly important because it’s not changing.

that’s, that’s pretty much all I get with that. And so, you know, I just. It’s just not the way that things need to evolve, right? 

Yeah. 

Things need to evolve in a way where we’re more cognizant about the ultra privilege that some of us have of being in these positions. you can not care about it.

Then maybe that’s just the kind of character you are, but that’s certainly not who I am. And I don’t think that’s how a lot of people who are coming up in a newer generation are thinking about things and we’re ready to shake them.

Even if you think you don’t care. I mean, even if you think you don’t really care, even if you haven’t quite understood why you’re scared, you can do it for self-interested reasons. we’re not, we’re not going to end up in a society. We want to live in like, that’s a self-interested piece.

  Like.

I mean, it’s, it’s, it’s just, the disparities are getting worse. The inequalities are getting worse. you know, you look at this asset class of venture capital driving, huge multiples, but yet so elusive

it’s so concentrated to like a really small group of, names and folks.

And. it’s time. We start to chip away at that. And, and I think it’s it’s healthy competition because, folks that are coming from diverse backgrounds are clearly going to see founders that are coming from those communities as well, that have been overlooked for years, decades.

that’s just all the OFA that has been missing out. So, we’re here doing that work, discovering this. And stepping up with conviction to back them. that’s one point that I really love about, you know, my partner and just the way that we’re operating is like, we really do feel conviction.

You know, we’re driven by that. when we meet a founder and we’re like, we want it. I don’t go ask any other VC their opinion on the deal because everyone’s yeah. Send people for an opinion. You’re going to get tended for reasons why you shouldn’t do the deal. So for me, it’s about, let’s step up, let’s write this term sheet and let’s talk about the importance of it.

Let’s get the right deal done and then let’s close on our money. So then that way the founder knows. We got their back, right? Their money’s in the bank. can start hiring. mindset starts to change a little bit. And so now we’re on the same team. We’re no longer starting to in different sites.

Now it’s about how do we find the right co-investors to come into your round are going to be valuable for you on this journey. But I think a lot of like the majority of the folks who. End up getting hurt by all these funds who always tell founders, oh, when you got to lead, come back. it’s the diverse folks, right?

It’s women, it’s people of color who get consistently told that all the time. Um, and so, you know, we, we, we need more, uh, more funds who are, willing and ready to step in right term sheets because, you know, without that, you know, we can’t.

you know, Austin and I obviously worked together at 10, 1 10 and. It’d be interesting. We sat on a panel together and, uh, all the people of color after the panel lined up to talk to him and all the women lined up to talk to me after the panel. And we’re at the same fund writing, the same size checks, you know, 

No, you know, but like it’s, it’s people will gravitate towards community, you know, where they feel comfortable with and that’s cool, you know, that’s okay. And that’s why like creating on environment that’s inclusive, that’s welcoming to folks of different backgrounds is incredibly important. We do that through the people we hire the way we invest and by the way we carry ourselves, you know, again, like we’re telling most of the founders we meet, no, but you can do that with respect.

Yeah, empathy is like, it’s such a, it’s such a smaller thing, but it’s such a value add here. Like most people don’t really bring everybody to the table. You’re just another spreadsheet. You’re just another company. And it’s just like, whatever, you know, I don’t, I don’t care about you. And, and again, like, I just feel like things have been done like that for so long when I’ve been on the other side.

you just feel like, what am I doing? Like who’s really here to support. So, So, you know, seeing folks like yourself, you know, and myself, you know, you can’t be what you can’t see. Right? So it’s, it’s important to see women and people of color in these seats of power, frankly, because we, we need to get more of them.

So my personal question, I feel a little unworthy of it. Like, and and I know I’m not the only person who like, I feel like I grew up with a ton of privilege. I did. and yet sometimes I get sort of almost the, the. What do I get like, uh, I get grouped in with sort of being in the minority.

I am in the minority clearly. and I know other folks, I was just talking with one of our founders actually. And, he’s Latino, but doesn’t speak Spanish. so how do you coach people around sort of navigating their own experience with diversity?

I guess.

That’s a great question. You know, look, I deal with imposter syndrome all the time. it’s just hard not to, you know, uh,

Okay.

I think as you’re, as you’re traversing new waters, you’re going to naturally feel scared at the moment in time. And, and that’s, that’s a normal thing, but I think what’s important is knowing that there’s other people out there that are like you, that may not have the exact same story, but that come from something similar.

And who are also out there fighting. And I think just knowing that, finding that community and that sense of belonging is what drives you and gives you the courage to just keep going until you figure it out. And so I ha I have this sort of UN sort of metaphor thing that I kind of think about. It’s like, it’s almost like.

You know, you have a big, lighter, right? You have this lighter and you’re like walking into a cave. And so you’re walking into this dark cave because you know, what’s behind you and you’re like, I’m not going back there. And there’s nothing for me back there. Right. Even though I don’t know what’s going forward, I’m still going to go this way.

So you walk into this cave with your lighter and obviously one big lighter. Doesn’t really eliminate a large path in front of you. So you’re going straight until you hit a wall and you’re touching your way. Cause you’re trying to. You’re just moving, trying to figure it out. But along the way, you come across someone else with their own liner and another person with their own lighter.

And you’re all trying to head towards the same destination, but maybe just don’t exactly know how to get there. Once you start combining those together, the light starts to get brighter and you’re starting to eliminate a path. Now, all of a sudden have visibility to see where you’re going, because you’re doing it as a group together. And I think that’s what is so important. Again, folks like yourself and myself being in these seats and, you know, learning how to with the anxieties and, you know, some of the imposter syndrome that comes because everybody goes through it, how we deal with it is going to be different for everybody.

But knowing that we, we, you know, it’s just really important to do that. Um, cause again, we’re not, we just can’t change the world if we’re not here to drive that. And we, and we have to open those doors and we have to be willing to, you know, help illuminate the path of others as well.

Yeah, that’s good. about your own journey? you went to UCLA, um, and, uh, did you grow up in LA as well? Did you always

know? You wanted to go to UCLA? What’s your story? 

Yeah. I grew up in San Diego. I’m a border town kid. I grew up in a city called Chula Vista, which was like right by the border with the Quanah kind of like one foot in TJ, one foot in Chula Vista, public schools, my whole life, I was very limited in my knowledge of the world.

 I was a smart kid, but not a genius. I just worked really hard and, you know, and you know, I would cry when I couldn’t figure out problems and cause I wanted to figure it out so bad. And I think that just was, the drive was always in me, but I know I had a, I had a. Yeah. I don’t know if it was an honors class and AP classes.

One of my history teachers had gone to UCLA undergrad and he’d gone to grad school at Stanford, but he loved UCLA and he had these like banners and he always talked about like what it was like going to school there and like the sixties and whatnot. So he took us on a trip. He took us on a trip to visit the camp, to visit Westwood and then a football games.

I remember showing up to the campus and I was just like, Oh, my God. Like you can go to school here in this like academic institution. It was, the sun was shining. The grass was green. There were like people sunbathing throwing Frisbees. I was like,   get the fuck outta here. Like, this is where I want to go. I didn’t know anything else.

I didn’t visit another school. This was it. This is just all I knew it, it had all the makings of what I wanted and I knew I wanted to get out of, you know, kind of my little community and experience the world. I used to get letters. Ivy league schools giving me full ride. I had no idea who they were and I would like he rip it up and throw it away.

Cause I didn’t want my parents to like see anything. It’d be like, I was so determined to go to UCLA. It was like UCLA or bust. So  I made the right decision because had I not gone there, I wouldn’t met the people that I’ve, that I’ve met and, and, you know, had the life that I have. So I, you know, I owe everything to the university and that community, it’s near.

Are your parents pretty proud of you now?

Yeah, they’re exceptionally proud. You know, they don’t know what I’m doing.  they don’t get the nuances and all of it, but I think I’ve been able to explain it enough, in simplistic terms that like they get it, when I got promoted to a partner here at the stir fund and you know, what’s going through the whole evolution I was telling my mom, like, my mom was just like, oh my gosh, I need to sit down.

Let’s just like, I feel like I’m going to faint right now. You know? Cause she was just like so proud of me and uh, you know, it’s, it’s, I’m, it’s just a privilege to be able to. To have come up from, from out of that and, and have the support, you know, everybody needs support. Everybody needs to feel family, you know, whether that’s blood or, or, you know, family that you choose. Right? You gotta have that because life is hard, And I think, you know, this is one of those things that you, you don’t really know until you get enough life experience and enough heartbreak and enough tragedy.

It’s just like, this is what life comes with. But. You know, how you, how you manage that, how you navigate those waters, what is ultimately going to determine, you know, your path? So, uh, I mean, I mean, I just feel super fortunate, privileged. don’t understand how it all came together here, but I’m grateful that it did.

And I live my life every day, knowing that I’m not going to take it for granted, you know, I’m going to keep working my butt off, keep learning. Try my best to make the right decisions, you know, knowing I’m going to make mistakes along the way, but, you know, I got a great partner. I got a great setup.

I’m patient, you know, I’m, I’m not, you know, I think that’s one thing that I developed really well is a level of patience. You know, I’m not expecting a payout tomorrow. Like I’m willing to do the work and do the grind because one day you go to bed, you wake up and all of a sudden a year ago, and then you go to bed again and wake up and now like a decade has passed, you know, 

you’ve been doing this, uh, is this fun too for you guys?

Yeah. we’re starting to raise our, third but where we got a few more investments to make kind of, out of fund, uh, on to here. So just like even thinking that, you know, it’s just like wildlife, just from where we started six years ago and Michael was explaining all this to me and he’s out.

 📍 And I was just like, looking at him like this guy’s fucking crazy. Like,

Okay.

is just, this sounds just like crazy, but, you know, I’m crazy too. I’m down. Let’s do it.

I love it. That’s great. Uh, and anything else? Um, anything else I should be asking you? This is in really, uh, it’s been surprisingly, like just, I feel really touched by this episode. I really like it. Um, anything else I need to cover, uh, about your investing? No, I think this has been great. I’m gonna wrap it up.

I think I edit this obviously.

Yeah, no, this is, this has been great. I appreciate. Being here, being able to have a safe space to have this conversation. You know, I just think it’s really important that we continue to have conversations like these and, you know, be open and honest about it, because there’s a lot of people that are listening in and, you know, just like looking for these kinds of stories.

And so, let’s, find our way to share them and continue to share them by, uh, by thing, like what you’re doing. So thanks for having me on your minis.

No, this is great. Yeah. I really enjoy getting to know you and act one better. So, uh, hopefully we get to collaborate more.

Yeah, definitely. Let’s get some more, deals done.

Okay. Thanks Alejandro.

You got it.

Awesome. Well, that can be it. That was really good. There’s so much good stuff. I, uh, I love doing this podcast because I get to know people so much

Yeah. Yeah, no, you, you you’re, you’re peeling back layers and you get to, uh, get a chance to really know somebody in a more intimate setting. Now this is, this is cool. I’m sure you’ve had some great conversations along the way and really getting to know.

Yeah, except it’s just, you know, everyone’s so different. Right? And so the conversation you have. Uh, some people, you know, want to talk about what it was like being on the board of Roku and some want to talk in a good way and someone to talk about what it, you know, how more, like, almost like the more personal journey would you shared?

Um, it was really motivating, really motivating to me.

Okay.

Uh, um, I actually, I mean, this is embarrassing. I was like, I don’t know whether we have the diversity writer at 10, 1 10. I really got to look at that. I was listening to you on a rebel one, I think

Yeah. Yeah.

And I was like, wait a second. I got it. I mean, I know it’s something David and Guild care a lot about, but I was like, I don’t think we actually, we could just make it more explicit.

Yeah. You know, it, it, it’s just a framework. There’s no law with it. You just, you know, want to adopt it into your standard term sheet. And if you guys are comfortable doing that, I’ll add you to the list here on the public list. There’s no reporting. There’s nothing. It’s just like, we’re here to make a commitment.

That we’re going to bring up this topic every time we do a deal, right. We’re going to do the work together with the founders.

and I think that’s a good message for VCs too, which is like, is a low commitment way of starting a conversation.

Exactly. And it was,

might as well. No reason not to signal this.

the, but the, but the implications are enormous or what can come of it. Right. So it’s like low risk, super high.

Yeah. Yeah. Um, I, that makes a ton of sense to me. So let me add that to my,

Cool.

uh, well, thanks so much.

Yeah.

we’ll probably put it out in a few weeks. I’ll send you a draft ahead of time. Um, in the meantime, it’s, uh, really appreciate it.

Yeah, me too. This is a lot of fun and a lot of fun. All right, Minnie.

great rest of your Monday. 

We’ll talk soon. bye.